December 10, 2019

New Rules Aim for Hospital, Insurer Transparency

The Trump administration on Nov. 15 announced two rules that would require more transparency in hospital pricing and health insurance out-of-pocket costs for enrollees.

The final rule on hospital pricing will require hospitals to publish their standard fees both on-demand and online starting Jan. 1, 2021, as well as the rates they negotiate with insurers. The administration also proposed rules that would require health insurers to provide their enrollees instant, online access to an estimate of their out-of-pocket costs for various services. 

The latter are just proposed rules and will have to go through a comment period before final rules can be issued. 

The two sets of rules are part of the Trump administration’s efforts to bring more transparency into the health care and insurance industry. They are in response to more and more consumers’ stories of serious financial strife after receiving surprise bills from hospitals and other providers, particularly if they had to go to a non-network physician or hospital.

Both rules could benefit health plan enrollees by giving them more information on hospital services, particularly if they are in high-deductible plans and can shop around for a future procedure, such as a mammogram or knee replacement surgery.

Hospital pricing transparency

In the original proposed regulations, the administration had proposed the effective date of the hospital price transparency rule as Jan. 1, 2020, but health providers said they would need more time to ramp up.

The new rules, effective Jan. 1, 2021, will require hospitals to publish in a consumer-friendly manner their standard charges price list of at least 300 “shoppable services,” meaning services that can be scheduled in advance, such as a CAT scan or hip replacement surgery.

The list must include 70 services or procedures that are preselected by the Centers for Medicare and Medicaid Services. Hospitals will have to disclose what they’d be willing to accept if the patient pays cash. The information will be updated every year.

Hospitals will be required to publish their charges in a format that can be read online. This rule could pave the way for apps that patients can use to compare services between hospital systems.

Under the rule, hospitals will have to disclose the rates they negotiate with third party payers.

The new rules face some uncertainty, however. The health care trade press has reported that a number of trade groups such as the American Hospital Association and the Federation of American Hospitals, among others, announced in a joint statement that they would sue the government, alleging that the new rules exceed the bounds of the CMS’s authority.

Out-of-pocket transparency

The proposed rule would require insurers to provide their health plan enrollees with instant online access to estimates of their out-of-pocket costs.

The regulations would require health insurers to create online tools their policyholders can use to get a real-time personalized estimate of their out-of-pocket costs for all covered health care services and products, such as:

  • Hospitalization
  • Doctor visits
  • Lab tests
  • Surgeries
  • Pharmaceuticals.

They would also be required to disclose on a public website negotiated rates for their in-network providers, as well as the maximum amounts they would pay to an out-of-network doctor or hospital. 

The proposed regs would also let insurers share cost savings with their enrollees if the individuals shop around for services that cost less than at other providers. This would give enrollees an incentive to shop around.

This proposed rule is also certain to face push-back from the insurance industry.

These out-of-pocket transparency regs are just proposals, so they have to go through the standard rule-making procedure of soliciting public comments before eventually issuing the final rules.

December 5, 2019

Large PBMs Balk at Push to Reduce Drug Prices

In a move that exemplifies the potential conflict of interest that some large pharmacy benefit managers have, the nation’s largest PBM earlier this year said it would demand that rebates remain unchanged when drug makers roll out new price cuts.

Drug makers earlier in the year said they would start reducing prices as well as the rebates they pay PBMs to appease lawmakers and the Trump administration, saying it would reduce the cost of medicine for patients.  

But not long after the announcement, the nation’s largest PBM, United Healthcare, fired off a letter to drug companies telling them that if they planned to reduce prices and rebates they would have to give seven quarters of notice (that’s 21 months if you’re counting) when they intend to lower prices.

The letter, which was confirmed in news reports in the health care trade press, highlights what many critics say is an inherent conflict of interest among some of the large PBMs operating in the country.

Some background

When PBMs first came on the market, the services they offered were processing pharmacy claims and negotiating discounts on medications for the health insurance companies with which they contracted.

Later though, they found a new way to make money: rebates. They would approach two manufacturers that made similar versions of a drug and play them off against each other to elicit the largest rebate they could. Whichever one offered the larger rebate would have their pharmaceutical placed on the drug plan’s formulary.

The problem is that these large PBMs do not pass on the full rebate to their clients, like health insurance companies and health plan enrollees. Instead, they keep most of the rebate for themselves. As a result, PBMs with this business model are not motivated to include the lowest-priced drug on their formulary, but rather the one for which they can receive the largest rebate check.

The latest

United Healthcare sent out the letter to drug makers after pharmaceutical manufacturer Sanofi S.A. said it would cut the price of its cholesterol-lowering drug Praluent by 60%. It did so after its competitor Amgen Inc. reduced the price of its cholesterol drug Repatha by the same amount.

United Healthcare’s demand that drug companies give 21 months’ notice when they plan to reduce prices has caught many drug makers off guard, since many of them have been looking to cut prices as pressure mounts on the industry from Washington.

The dominance of United Healthcare’s PBM OptumRX and its competitor Express Scripts means that group health plan enrollees are often left at their mercy, as many large health insurers have contracts with them.

If a drug company does not give the rebate that a large PBM demands, it could lose access to patients – and patients lose access to that drug. The only way to play the game is to offer a larger rebate and increase prices, which in turn increases the prices that patients have to pay.

Fortunately, there are a number of smaller PBMs in the marketplace that have different business models that take payers’ needs into consideration and aim to reduce the out-of-pocket costs for patients. They contract with employers and insurers directly to make this happen.

November 26, 2019

New Rules Aim for Hospital, Insurer Transparency

The Trump administration on Nov. 15 announced two rules that would require more transparency in hospital pricing and health insurance out-of-pocket costs for enrollees.

The final rule on hospital pricing will require hospitals to publish their standard fees both on-demand and online starting Jan. 1, 2021, as well as the rates they negotiate with insurers. The administration also proposed rules that would require health insurers to provide their enrollees instant, online access to an estimate of their out-of-pocket costs for various services. 

The latter are just proposed rules and will have to go through a comment period before final rules can be issued. 

The two sets of rules are part of the Trump administration’s efforts to bring more transparency into the health care and insurance industry. They are in response to more and more consumers’ stories of serious financial strife after receiving surprise bills from hospitals and other providers, particularly if they had to go to a non-network physician or hospital.

Both rules could benefit health plan enrollees by giving them more information on hospital services, particularly if they are in high-deductible plans and can shop around for a future procedure, such as a mammogram or knee replacement surgery.

Hospital pricing transparency

In the original proposed regulations, the administration had proposed the effective date of the hospital price transparency rule as Jan. 1, 2020, but health providers said they would need more time to ramp up.

The new rules, effective Jan. 1, 2021, will require hospitals to publish in a consumer-friendly manner their standard charges price list of at least 300 “shoppable services,” meaning services that can be scheduled in advance, such as a CAT scan or hip replacement surgery.

The list must include 70 services or procedures that are preselected by the Centers for Medicare and Medicaid Services. Hospitals will have to disclose what they’d be willing to accept if the patient pays cash. The information will be updated every year.

Hospitals will be required to publish their charges in a format that can be read online. This rule could pave the way for apps that patients can use to compare services between hospital systems.

Under the rule, hospitals will have to disclose the rates they negotiate with third party payers.

The new rules face some uncertainty, however. The health care trade press has reported that a number of trade groups such as the American Hospital Association and the Federation of American Hospitals, among others, announced in a joint statement that they would sue the government, alleging that the new rules exceed the bounds of the CMS’s authority.

Out-of-pocket transparency

The proposed rule would require insurers to provide their health plan enrollees with instant online access to estimates of their out-of-pocket costs.

The regulations would require health insurers to create online tools their policyholders can use to get a real-time personalized estimate of their out-of-pocket costs for all covered health care services and products, such as:

  • Hospitalization
  • Doctor visits
  • Lab tests
  • Surgeries
  • Pharmaceuticals.

They would also be required to disclose on a public website negotiated rates for their in-network providers, as well as the maximum amounts they would pay to an out-of-network doctor or hospital. 

The proposed regs would also let insurers share cost savings with their enrollees if the individuals shop around for services that cost less than at other providers. This would give enrollees an incentive to shop around.

This proposed rule is also certain to face push-back from the insurance industry.

These out-of-pocket transparency regs are just proposals, so they have to go through the standard rule-making procedure of soliciting public comments before eventually issuing the final rules.

November 19, 2019

How to Get the Benefits of Self-Funding without the Risks

There are typically two approaches to securing health coverage for your staff – group health insurance or self-funding.

Self-funding, however, can be costly and risky and is usually only done by larger organizations with thousands of employees. But there is a hybrid model that can help small and mid-sized employers provide their staff with affordable health coverage: partial self-insuring.

To understand how partial self-insuring works, we should start with the basics of what a self-insured plan is. In a fully self-insured plan, the employer bears the risk of all costs incurred under the plan for claims and administration.

In essence, the employer acts as the insurer and pays claims from a fund that it pays into along with employees, who pay their share of premiums into the fund.

Also, the employer will usually contract with a third-party administrator or an insurance company to process claims and provide access to a network of physicians and other health care providers.

How partial self-insuring works

Partially self-insured arrangements provide some of the benefits of being self-funded but without all the risks, while plans will have the same benefits as insured plans have. Here’s how they work:

  • Employers and their employees still pay premiums, a portion of which goes into an account that will be tapped to pay the first portion of claims that are filed. That means that the employer is acting as the insurer for those claims.
  • The other portion of the premium is paid to an insurance company. This is sometimes known as a stop-loss policy.
  • Plans have an aggregate deductible for all claims filed by employees, meaning that once that deductible is reached an insurer starts paying the claims instead.
  • Premiums are calculated to fund the claims to the aggregate deductible amount. In other words, the employer and employees are paying for the worst-case scenario in each policy year.
  • It is possible for the employer to get a refund at the end of the policy year if the total claims come in at a level that is less than expected. The employer can either be reimbursed for this amount or use those funds for the next policy year.

Lower risk than fully self-insured plan

Typically, an employer should have at least 25 workers if it is considering a partial self-funded arrangement, but we’ve seen plans with fewer enrollees.

Many employers will opt for a partially self-insured plan to save money, but these types of plans also allow an employer to design a more useful and valuable plan for its workers.

The key to making this work is cost control, without which claims can spiral and drive up premiums at renewal.

Knowing exactly how much to set aside for reserves and how much you should set your employees’ premiums, deductibles and other cost-sharing can be complicated.

But with the right mixture of benefits, plan design and education, you can control behavior, which drives claims, in order to keep renewal rates from increasing too much each year.

The fine print

That said, there are some reasons partial self-insuring isn’t for all employers:

  • There is additional responsibility, as the employer basically becomes an insurer or sorts.
  • There is additional paperwork for these plans since the employer also becomes a payer.
  • There are compliance issues that the employer needs to consider (ERISA and the Affordable Care Act, for example).
  • There is some additional risk to the employer, as it is paying claims.
  • If you have too many claims, you could face a non-renewal by your stop-loss insurer. If you are cancelled, it may be difficult to seamlessly enter the insured market.
November 12, 2019

Average Family Plan Cost Hits $20,000 for First Time; What Can You Do to Cut Costs?

A new study has found that the average annual premium for a group family health plan has exceeded $20,000 for the first time in 2019, up 5% from 2018.

The average premium for single coverage plans in 2019 is $7,188, up 4% from the year prior, according to the Kaiser Family Foundation’s annual report on employer coverage.

The costs of high-deductible health plans are only slightly less than the average. The average premiums for covered workers in HDHPs with an attached health savings account are $6,412 for single coverage and $18,980 for family coverage.

Increasingly, workers are picking up a larger portion of the health care and insurance tab. In 2019, they are paying $6,015 on average in premiums for family coverage, or about 29% of the total tab. Workers with individual coverage contribute 17.3% toward the total premium.

Additionally, the average deductible for single coverage is $1,655 in 2019, which is unchanged from the year prior, however, the deductible is often higher for workers in small firms ($2,271) compared to large businesses ($1,412).

The average annual deductible among covered workers with a deductible has increased 36% over the last five years and 100% over the last 10 years, according to the report.

Also, 66% of workers have coinsurance and 14% have a copayment for hospital admissions. The average coinsurance rate for a hospital admission is 20%, and the average copayment is $326 per hospital admission.

Another survey by the Kaiser Family Foundation and the Los Angeles Times found that 40% of group health plan enrollees had difficulty affording health insurance or health care, or had problems paying medical bills.

And close to 50% said that they or a family member had skipped or postponed getting health care or prescriptions in the past year due to costs.

Easing the burden

There are steps you can take to ease the burden on both your company and your employees.

Consider plans with telemedicine – More and more employers (69% of firms with 50 or more workers) are offering health plans that cover the provision of health care services through telemedicine. Telemedicine can greatly reduce the cost of care in terms of price for medical visits, as well as the time involved for the employee to travel to the doctor.

Telemedicine can include video chat and remote monitoring.

Utilizing retail health clinics – More health plans will pay for services rendered by retail clinics, like those located in pharmacies, supermarkets and retail stores. These clinics are often staffed by nurse practitioners or physician assistants and treat minor illnesses and provide preventative services. They can greatly reduce the cost of care for these kinds of visits outside normal hospital systems.

Plans with narrow networks – If a health plan can contract with fewer doctors and specialists, there is often less outlay for care. At this point, the jury is still out on exactly how much can be saved, but there are also drawbacks such as:

  • Disruption of provider relationships
  • Employee backlash
  • Reduced access or convenience for employees
  • Lack of specialists.

Tiered or high-performance networks – These networks typically group providers in the network based on the cost, quality and/or efficiency of the care they deliver and use financial incentives to encourage enrollees to use providers on the preferred tier.

November 8, 2019

The ‘Cadillac Tax’ May Finally Be Repealed

The much-maligned “Cadillac tax,” which was supposed to be implemented as a tax on high-value group health plans with premiums above a certain level, may finally be seeing the end of the road.

Already the implementation of the tax, which was created by the passage of the Affordable Care Act, has been postponed twice. It was originally supposed to take effect in 2018 under the ACA. The tax was delayed two years by Congress in 2016, pushing implementation ahead to 2020. It was delayed again in 2018 and is currently scheduled to take effect in 2022.

But now the House has overwhelmingly voted to ditch it once and for all.

The Cadillac tax is an excise tax that applies to any group health policy that would cost more than $11,200 for an individual policy, or $30,150 for family coverage. Starting in 2022, a 40% tax would apply to any premium above those levels (so if an individual policy cost $12,000 a year, the tax would apply to the $800 excess over the $11,200 level).

Although the insurance company would have to pay the tax, it is widely believed that insurers would pass it on to the employer.

Widespread distaste for the tax

The tax was maligned by both employers and labor unions, many of which receive generous benefits packages that would have been subject to the tax. Labor disliked it because they felt that employers would cut benefits to avoid paying it or pass the tax on to employees. Employers disliked the tax because, well, it’s another tax – and a hefty one at that.

But supporters of the ACA said the tax was necessary to pay for the law’s nearly $1 trillion cost and help stem the use of what was seen as potentially unnecessary care.

While there is widespread support for repealing the tax, not everyone is on board. A group of economists and health experts wrote a letter to the Senate on July 29 in which they argued that the tax “will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount.”

The letter also pointed out that repealing the tax “would add directly to the federal budget deficit, an estimated $197 billion over the next decade, according to the Joint Committee on Taxation.”

This summer, the House of Representatives voted 419 to 6 to repeal the tax. Currently, a Senate companion bill has 61 co-sponsors, but the legislation has not yet come up for debate.

That said, most observers expect that the bill will soon be put up for a vote, meaning that the Cadillac tax will likely be sent to Cadillac ranch – having never seen the light of day.

October 29, 2019

How to Get the Benefits of Self-Funding without the Risks

There are typically two approaches to securing health coverage for your staff – group health insurance or self-funding.

Self-funding, however, can be costly and risky and is usually only done by larger organizations with thousands of employees. But there is a hybrid model that can help small and mid-sized employers provide their staff with affordable health coverage: partial self-insuring.

To understand how partial self-insuring works, we should start with the basics of what a self-insured plan is. In a fully self-insured plan, the employer bears the risk of all costs incurred under the plan for claims and administration.

In essence, the employer acts as the insurer and pays claims from a fund that it pays into along with employees, who pay their share of premiums into the fund.

Also, the employer will usually contract with a third-party administrator or an insurance company to process claims and provide access to a network of physicians and other health care providers.

How partial self-insuring works

Partially self-insured arrangements provide some of the benefits of being self-funded but without all the risks, while plans will have the same benefits as insured plans have. Here’s how they work:

  • Employers and their employees still pay premiums, a portion of which goes into an account that will be tapped to pay the first portion of claims that are filed. That means that the employer is acting as the insurer for those claims.
  • The other portion of the premium is paid to an insurance company. This is sometimes known as a stop-loss policy.
  • Plans have an aggregate deductible for all claims filed by employees, meaning that once that deductible is reached an insurer starts paying the claims instead.
  • Premiums are calculated to fund the claims to the aggregate deductible amount. In other words, the employer and employees are paying for the worst-case scenario in each policy year.
  • It is possible for the employer to get a refund at the end of the policy year if the total claims come in at a level that is less than expected. The employer can either be reimbursed for this amount or use those funds for the next policy year.

Lower risk than fully self-insured plan

Typically, an employer should have at least 25 workers if it is considering a partial self-funded arrangement, but we’ve seen plans with fewer enrollees.

Many employers will opt for a partially self-insured plan to save money, but these types of plans also allow an employer to design a more useful and valuable plan for its workers.

The key to making this work is cost control, without which claims can spiral and drive up premiums at renewal.

Knowing exactly how much to set aside for reserves and how much you should set your employees’ premiums, deductibles and other cost-sharing can be complicated.

But with the right mixture of benefits, plan design and education, you can control behavior, which drives claims, in order to keep renewal rates from increasing too much each year.

The fine print

That said, there are some reasons partial self-insuring isn’t for all employers:

  • There is additional responsibility, as the employer basically becomes an insurer or sorts.
  • There is additional paperwork for these plans since the employer also becomes a payer.
  • There are compliance issues that the employer needs to consider (ERISA and the Affordable Care Act, for example).
  • There is some additional risk to the employer, as it is paying claims.
  • If you have too many claims, you could face a non-renewal by your stop-loss insurer. If you are cancelled, it may be difficult to seamlessly enter the insured market.
October 22, 2019

Trump Administration Decides Not to End PBM Rebates

The Trump administration has decided not to pursue a policy that would have put an end to rebates paid to pharmacy benefit managers, which could put the focus again on how drug companies set their prices.

The proposal would have barred drug companies from paying rebates to PBMs that participate in Medicare and other government programs. According to the administration, the proposed rules were shelved because Congress had taken up the issue to control drug costs.

The spotlight has been harsh on some of the country’s largest PBMs, which have been accused of pocketing a substantial portion of the rebates for themselves while passing on only a sliver of the rebates to the insurance companies that hire them and the health plan enrollees that pay out of pocket for the drugs.

Rebates had become a popular target of criticism in Washington after drug companies lobbied aggressively to cast them as the reason for high prices. PBMs negotiate drug discounts in the form of rebates, often keeping some of that money for themselves.

However, many pundits say that the rebate system put in place by large, national PBMs incentivizes drug companies to keep list prices high, which in turn defeats the purpose of the PBMs – that is, to reduce the out-of-pocket costs that health plan enrollees pay for their prescription drugs.

Like insurers and PBMs, some of which have sought to undermine the practice with accumulator adjustment programs, the Trump administration believes such coupons may be driving up health care spending by getting patients to opt for higher-priced name-brand drugs over generics.

The Centers for Medicare & Medicaid Services proposal unveiled in January would have essentially blocked drug manufacturer rebates from going to PBMs and health plans that serve Medicare and Medicaid patients, starting next year.

Now that the push to eliminate rebates has come to end, the focus looks like it’s shifting to how drug companies price their products. We will keep you posted if any legislation surfaces in this area.

October 15, 2019

Trump Administration Decides Not to End PBM Rebates

The Trump administration has decided not to pursue a policy that would have put an end to rebates paid to pharmacy benefit managers, which could put the focus again on how drug companies set their prices.

The proposal would have barred drug companies from paying rebates to PBMs that participate in Medicare and other government programs. According to the administration, the proposed rules were shelved because Congress had taken up the issue to control drug costs.

The spotlight has been harsh on some of the country’s largest PBMs, which have been accused of pocketing a substantial portion of the rebates for themselves while passing on only a sliver of the rebates to the insurance companies that hire them and the health plan enrollees that pay out of pocket for the drugs.

Rebates had become a popular target of criticism in Washington after drug companies lobbied aggressively to cast them as the reason for high prices. PBMs negotiate drug discounts in the form of rebates, often keeping some of that money for themselves.

However, many pundits say that the rebate system put in place by large, national PBMs incentivizes drug companies to keep list prices high, which in turn defeats the purpose of the PBMs – that is, to reduce the out-of-pocket costs that health plan enrollees pay for their prescription drugs.

Like insurers and PBMs, some of which have sought to undermine the practice with accumulator adjustment programs, the Trump administration believes such coupons may be driving up health care spending by getting patients to opt for higher-priced name-brand drugs over generics.

The Centers for Medicare & Medicaid Services proposal unveiled in January would have essentially blocked drug manufacturer rebates from going to PBMs and health plans that serve Medicare and Medicaid patients, starting next year.

Now that the push to eliminate rebates has come to end, the focus looks like it’s shifting to how drug companies price their products. We will keep you posted if any legislation surfaces in this area.

October 9, 2019

Many Workers Struggle with Medical Bills, Despite Having Insurance

A new survey has found that many American workers are struggling with medical bills even though they have employer-sponsored health plans.

The good news from the survey was that 81% of respondents said they had health insurance, which meant they were 19% more financially fit than people without insurance. They were also happier.

The survey found that:

  • One in 10 employees who have insurance and pay part of the premiums, also have annual out-of-pocket medical bills of more than $10,000.
  • 33% of insured employees carry medical debts that they are trying pay down.
  • Insured employees that carry medical debt are 42% less financially fit than those who do not have such debt.

Carrying debts related to medical care also affects employees’ health. The survey found that workers with money problems are:

  • Three times more likely to suffer from anxiety and panic attacks.
  • Eight times more likely to have sleep problems.
  • Four times more likely to suffer from depression and have suicidal thoughts.

Stress from medical debts can also affect worker productivity. Of employees with medical debt problems:

  • 24% have troubled relationships with co-workers.
  • 22% cannot finish their daily tasks.

Lost productivity from these two issues costs businesses up to 14% of payroll expenses, the survey found.

What can you do

Given that health care costs show no signs of abating, what can you do for your low-wage employees and also ensure that your own health insurance premiums don’t spiral out of control? Here are some options:

Vary premium level – If you have a mix of highly paid staff and lower-wage workers, you can create a tiered system where the latter receive greater premium contributions from you than do the former. About a quarter of large employers vary employee health insurance premiums. This is something that’s not feasible for all businesses, particularly if money is tight.

Offer plans with generous benefits – You can offer a slate of plans, from ones with larger copays and deductibles to those with low or no out-of-pocket costs for those employees willing to pay more in premium. This way, your low-wage workers have a choice of health plans which include lower deductibles and lower variability in potential out-of-pocket liability.

Offer skinny plans – Skinny plans still cover the 10 benefits required by the Affordable Care Act, but they typically have a narrow network of providers in exchange for low out-of-pocket costs for the enrollee. While this option is good for your younger and healthier worker, it is often a non-starter for those who have existing health issues.

Carefully review incentives and subsidies – Employers should design wellness incentives that do not penalize low-wage workers, who are more likely to smoke, (many employers impose a tobacco surcharge averaging $600 a year). Employers should couple tobacco surcharges with tobacco-cessation programs, and waive surcharges for employees who are trying to quit.

Offer plans with modern attributes – Telemedicine services can reduce health care costs, as they reduce the worker’s need to take time off for an appointment and also lower the cost of delivery of care.

Push for lower prices and costs – You should coordinate with us, so we can work with your health plans and providers to reduce costs.